What level of pretax cost savings would you be indifferent


Your firm is contemplating the purchase of a new $580,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $60,000 at the end of that time. You will be able to reduce working capital by $75,000 (this is a one-time reduction). The tax rate is 35 percent and the required return on the project is 15 percent. If the pretax cost savings are $200,000 per year, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) NPV $ 48979.30 Will you accept or reject the project? Reject Accept X If the pretax cost savings are $150,000 per year, what is the NPV of this project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) NPV $ -59965.74 Will you accept or reject the project? Accept Reject X At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Cost savings $

Request for Solution File

Ask an Expert for Answer!!
Financial Management: What level of pretax cost savings would you be indifferent
Reference No:- TGS02310311

Expected delivery within 24 Hours